Facing Student Debt with Eyes Wide Open

Too many high school students stumble through applications for college loans with far more optimism than realism. Looking back on their blindfold walk, more than a third of young people recently reported that they would not have attended college if they’d known what the total cost would be.

Higher education is becoming unsustainable both for students and for society. The $1.34 trillion in student debt that young Americans have racked up limits their life choices, forcing them to postpone marriage and home ownership and restricting their careers (ruling out options to work their values in lower-paying professions that benefit community and earth). Escalating student debt saps vitality from our culture and economy, squelching innovations needed to improve our world.

Back in 1971, the total yearly cost for a private four-year college averaged less than $3,000, notes Boston Globe writer Neil Swidey. Had college costs kept pace with inflation, the annual price tag now would average around $17,000, rather than $44,000.

Institutions require families to pay more when other revenue sources dwindle – as can happen when state support for public universities drops. Yet costs also climb due to spending on high-paid administrative roles and upscale campus facilities. Between 1997 and 2012, the median square-foot cost tripled for academic and science buildings and quintupled for residential halls. Students burdened with ever more debt often dwell in a surreal world of luxurious residential suites, elegant dining halls and resort-class fitness centers.

Despite the extravagance in higher education, many families resign themselves to paying top dollar and assuming debilitating debt. There is another way, though; fully a third of college students still graduate without student loans, giving themselves options to pursue entrepreneurial ventures, creative endeavors and work for the greater good.

Zac Bissonnette shows how to realize this goal with no parental help in Debt-Free U, a book he wrote while paying his own way at the University of Massachusetts. Bissonnette and other authors (such as Kristina Ellis, Alex Chediak and Marco LeRoc) offer signposts pointing toward a more sustainable educational path. Here are some of their recommendations, directed to high-school students.

BE SKEPTICAL

You’re about to enter a process that demands the wariness of a used-car search. Don’t focus on the collegiate equivalent of heated seats (like food courts and swimming pools); concentrate on functionality and value. As with vehicles, name brands hold surface appeal but may not be worth the inflated price.

Realize that some of those advising you may have inherent conflicts. College financial aid officers have a stake in your enrolling, whether or not you can afford it; high school counselors may be under pressure to direct you toward a four-year institution rather than a more affordable community college.

Higher education can increase your long-term earning power, but it’s not a simple equation. Roughly half of recent college graduates are in low-paying jobs that don’t require a degree. Median real annual earnings for college graduates rose less than $800 between 1986 and 2013 (while those of high school graduates actually dropped by $2,525).

BE SAVVY

Study personal finance so you understand the implications of compound interest and – before enrolling – estimate any future monthly loan repayments. Don’t be taken in when schools conflate work study or loans (including parent PLUS loans) with “aid awards.” (If you expect your parents to take out loans or draw on home equity or retirement savings for your education, be prepared to support them in their old age.)

College loan officers may not pull as many tricks as car retailers, but they’re not above sending misleading letters with a “net price” that neglects major costs like room and board. Award letters outline only one year’s costs, so estimate your four-year investment.

Scholarship awards can sound like free money, but some schools deduct these from their aid package so the family contribution does not change. Institutions also may front-load grant awards in the first year, providing fewer in subsequent years. Identify these patterns and compare school statistics using tools like College Navigator.

BE SENSIBLE

When you borrow money for a house or car, you can resell those possessions to repay debt. With student loans, you are the collateral. If you default, lenders can garnish your wages, tax refunds and Social Security benefits.

Work during college can do far more than pay bills: It prepares you for future jobs. A 2014 Pew Research Center study found that fully half of college graduates wished they had gained more work experience during college.

BE SELF-DIRECTED

Make college choices that won’t limit future options to serve your community and the larger world. Better yet, begin those transformative experiences before entering college. Taking time to mature during a gap year can boost your motivation and focus, increasing the odds that you’ll finish on time (and hence save money).

College can expand your mind and opportunities, but keep in mind that – far more than the name on your degree – your own initiative and perseverance will shape your future.